Panel: Lessons learned from U.S. unconventionals can be applied globally

10/31/2013

Panel: Lessons learned from U.S. unconventionals can be applied globally

BY MELANIE CRUTHIRDS, News Editor

HOUSTON -- Unconventional resources, like shale gas and tight oil, present their own sets of unique challenges, many of which have been addressed, with varying degrees of success, by operators in onshore plays in the U.S. However, there are still lessons to be learned in this characteristically low-margin space, and overseas operations represent a key learning opportunity, according to panelists from Baker Hughes, XTO Energy, Statoil and Tudor, Pickering, Holt & Co., who spoke at the annual Women’s Global Leadership Conference this week.

Speaking from the operational side, Andrée Griffin, XTO’s V.P. of geology and geophysics, said the relatively low margins many unconventional project teams operate within mean that groups must remain focused on integration. When there is less room for error, and returns are not guaranteed, the ability for groups to work efficiently gives them the power to test out new ideas, and receive feedback in a faster, more streamlined way, so that knowledge is constantly being returned to the team. In the end, Griffin said, teams are often able to improve their profit margin by working more efficiently, and keeping an eye on lowering costs. This model of operating is being honed in U.S. projects, but can be readily applied to plays around the world.

On the other end of the spectrum, Veronica Roa, V.P. of Onshore, Land, for Statoil, shared how her company, coming from overseas, entered the U.S. onshore market without much organizational structure. The company’s entrance into the Marcellus shale a few years ago meant that it would need to undertake a huge learning journey, in order to stay competitive in a space where the other operators present already had years of experience in the area. After gleaning some important lessons from Chesapeake, from which Statoil acquired its shale acreage, the company was slowly gathering the knowledge base and resources it would need to position itself as an operator, later.

By 2010, said Roa, Statoil had completed an acquisition alongside Talisman Energy, giving the company the right to operate within three years, a right which could be applied to half of the recently-acquired asset. Through a deliberate transition process with Talisman, Statoil continued to learn from its partner about an area to which it was still very new. With the acquisition of Brigham Exploration in 2011, Statoil gained personnel and experience in Williston, N.D., and Austin, Texas, which bolstered the company’s presence as a shale player. Today, said Roa, Statoil’s onshore organization has grown from three to 300 people, and is poised to support ongoing unconventional projects around the world, especially in Australia. As of September 2013, Statoil began operation on its JV with PetroFrontier, taking the lessons it learned from its U.S. experiences to yet another new focus area.

Baker Hughes’ V.P. and Chief Reservoir Engineer, Usman Ahmed, reiterated the fact that the U.S. unconventionals market, the same one in which XTO and Statoil now operate, was able to really take off because of pre-existing domestic infrastructure. But, there are still lessons to be learned, in the U.S. and overseas. Before countries with good unconventional resources, like Russia, Turkey, Saudi Arabia, China, Australia and Colombia, are able to successfully harness this potential, the market, ad a whole, faces some challenges. Through shale gas, tight oil and coalbed methane, said Ahmed, 70% of unconventional wells in the U.S. are still not reaching their production targets, and 60% of the frac stages performed here are not effective. Those numbers do not shed the most positive light on the market, but that is not the end of the story.

According to Ahmed, if organizations can overcome some key challenges, they may be able to hit their targets and operate successfully in narrow margins. The cost of drilling and completing unconventional wells poses its own economic challenge, while access to resource sites and transportation infrastructure gaps present more logistical hurdles. And, especially in areas where E&P activity has yet to really take hold, environmental concerns remain an important focus area. Rounding out the list of critical challenges, said Ahmed, are the commitment to developing technology to access these resources, and the sometimes-spotty availability of oilfield services and equipment on remote or frontier sites. Unconventional resources around the world have the potential to generate profit, but companies must continue to focus on efficiency and cost-effectiveness to make it work.